Redback posts first profit in 5 years

Redback Networks posted its first quarterly profit in five years. The maker of IP service edge routers and broadband aggregation systems recorded fourth-quarter GAAP earnings of $300,000, or 1 cent per share, on revenue of $48 million.

For the same period a year ago, Redback lost $12.0 million or 23 cents per share on a GAAP (generally accepted accounting principles) basis.

Non-GAAP earnings for the quarter -- which exclude charges and other expenses -- were $400,000, compared to a non-GAAP net loss of $4.2 million, or 8 cents per share, for the fourth quarter of 2004.

Fourth-quarter revenue was up 50% from the fourth quarter of 2004, and up 32% from the third quarter of 2005. Net revenue for the fiscal year 2005 was $153.3 million, compared with $115.6 million in fiscal year 2004.

“I am very pleased with the progressive revenue growth and profitability in the quarter,” said Kevin DeNuccio, Redback president and CEO, in a statement. DeNuccio added that sales of Redback's SmartEdge Service Gateway were up 105% from 2004.

Redback last year won a significantly next-generation broadband contract at BellSouth. Some analysts expect continued momentum with carriers this year.

"We also expect revenue recognition at 4-5 other major carriers in 2006, as well as growing high-margin line card sales into existing chassis," states Steve Kamma of CIBC World Markets in an earnings bulletin. "We are optimistic about a potential win at SBC/AT&T (more so than Verizon) & potential partnerships in cable and wireless/IMS. We are also encouraged to new business-class network deployments at existing DSL customers. We also note BellSouth's mid-'06 IPTV trials as another demand driver."

Kamman says Redback's revenue in the quarter exceeded his expectations. Analysts queried by Thomson First Call were expecting breakeven results on revenue of $42.6 million.

Redback expects first-quarter 2006 revenue to grow 5% to 10% on a sequential basis.